Can’t we just ask the regulator?
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It is well known and widely reported that regulations have grown in scope, density, interrelation and complication since those mad, dreamy Eighties days when rules were for birds and the Randian spirit of Aleister Crowley was the dominant fingerpost showing the way towards market governance.
“Do what thou wilt shall be the whole of the Law”.
The world of modern finance was unexplored: broken-fenced frontiers everywhere you looked, and you were free to wander amongst the hinterland unrestrained by official hand. This, contemporary thought leaders believed, was best for everyone, in the long run.
Now to survive its own auto-destruction, any new programme must self-organise: that founding spirit of optimistic anarchy will resolve to well-meant gentle governance which in time will calcify into impenetrable rules, etiquettes and ways of operating calculated to maintain the emergent power structure around the programme. This happened to the fifties, to rock ’n’ roll, to the internet, it’s happening to crypto and will happen to the metaverse.
The financial markets are the same: the libertine laissez-faire of the eighties that made all this possible has given way to utter technocracy.
A freedom that once seemed hopeful and elegant now seems barbaric in its simplicity. We have become inured to the idea that our every or financial impulse should be minutely monitored, reported, and regulated.
The theory
And that is fine. Being a pragmatist, it is not the JC’s motive to take sides in the cosmic debate: rather, to say, however heavily we frame our rules, good governance and our well-rehearsed imperative of juridical certainty requires them to be as plain, clear and actionable as they can be. Participants should not be left in doubt for what they can and cannot do, and should not be held hostage for the consequence of acting in a case of genuine doubt.
Nor should rules be above criticism: times change, unintended consequences emerge, people make bad rules. Practitioners at the coal face are the first to apprehend them. They should not be loathe to point them out.
In any sensible polity, rules carrying sanctions must be easy to understand, follow and challenge. The optimal scenario: everyone abides by the rules, and there is an easy and open process to challenge the ones that don’t work.
The reality
The reality is that global regulation is a monstrous burden. Even sensible jurisdictions have a habit of mandating multiple regulators overseeing ostensibly the same territory (SEC, CFTC, FRB, FDIC in the US alone), and that is before we deal with the conundrum of cross-border regulation where conflicts and regulatory perimeters come into play, and the actions of supranational bodies such as the Basel Committee on Banking Supervision.
This is licence enough for the military-industrial complex of legal, accounting and compliance advisors that have grown around the markets, but it is made worse by the reluctance of regulators to take a position on what their own rules mean.
Anyone in the business will know this is the aspiration of an utter fantasist. Anglo Saxon regulators wouldn’t dream of giving guidance, perhaps fearing the precedent an erroneous ruling night create, perhaps acknowledging that their own staff have no better idea what the rules are meant to mean than anyone else: they are as prone to budget cuts, outsourcing, and the dogma of management by data as anyone else.